Detroit's bankruptcy: Broke city, broken management

Sep. 29, 2013

Rick Nease/Detroit Free Press

Written by

John Gallagher and Nathan Bomey

Detroit Free Press Business Writers

Dealing with the City of Detroit can seem like a throwback to a less efficient, pre-wired age.

Just ask Marlin Page, who served as Detroit’s deputy chief information officer early in Mayor Kwame Kilpatrick’s administration. A veteran of Compuware, Page recalled recently how she came to city government eager to bring the benefits of technology to the city.

“All I wanted to do was to give our citizens a chance to interact with city government via the Internet,” she said at the recent Techonomy conference in Detroit. “And I’ll never forget, there was a man there who said, ‘The people in Detroit don’t want to do that. They don’t want to pay property taxes online.’ ”

She added, “I can’t tell you what I said then. ... We were able to do it, but it was tough. It was years in the making.”

For decades, the fight to bring efficiencies to city government in Detroit has been a demoralizing — and usually a losing — battle. It’s a key example of how mismanagement runs as a thread throughout Detroit’s fiscal history.

As documented by media reports, audits and reviews going back decades, the city has notoriously bungled federal aid programs over the years, forcing the city to return or never accept federal dollars it couldn’t spend. In recent years, the city has reluctantly spun off multiple agencies and functions, including Cobo Center, Eastern Market and its work force training and development office, all of which it had failed to run efficiently.

Mismanagement contributed to the city’s fiscal distress, and stemmed from many causes. Among those: antiquated information systems, a dwindling city work force, lack of money to train city workers properly and the city’s fractious politics, not to mention corruption.

Numerous veterans of city government said they have been astonished and dismayed by how hard it has been to improve city processes and procedures.

(Page 2 of 3)

“By the time I joined the city, it was pretty broken,” said Pamela Moore, a human relations and management expert who served in the administrations of Kilpatrick and Mayor Dave Bing and now runs the city’s recently spun-off work force development agency Detroit Employment Solutions. “You had capacity issues. People are pretty angry. ... It added to the culture of, ‘Well you really don’t get rewarded for doing good working in the city and you really don’t get punished for doing poor work.’ ”

If the city’s fiscal crisis of recent years worsened the problem by forcing the layoff of half the city’s work force, the inefficiencies trace back several decades. Some examples from the past:

■ In the 1980s, Detroit estimated it would have to pay $2 million for three buildings filled with used industrial equipment needed to make way for the new Chrysler Jefferson North plant. The city wound up paying $42 million. Emmett Moton Jr., then Mayor Coleman Young’s director of economic development, later apologized to the City Council in 1988 for what he called “the worst deal I have ever been associated with.”

“I am appalled at the ineptness of the city administration in handling condemnation cases,” then-City Councilman Mel Ravitz said at the time.

■ In the 1990s, the U.S. Department of Housing and Urban Development made Detroit the first city to be cut off from a portion of HUD’s largest home repair program, known as HOME. The Free Press reported then that Detroit’s HOME program had received $80.5 million between 1992 and 1998, but spent only $26 million to repair or build just 448 homes.

Joseph Harris, Detroit’s auditor general from 1995 to 2005, said the city has consistently ignored opportunities to cut wisely. In 1998, the nonprofit business leadership group Detroit Renaissance commissioned a report by David M. Griffith & Associates that suggested the city could save more than $30 million each from its police, water and sewer, and transit departments.

“That was just put aside,” Harris said. “The point is nothing was done.”

(Page 3 of 3)

■ In 2009, a scathing report from the city’s auditor general found that chronic mismanagement of Detroit’s Municipal Parking Department has led to a lack of control over the $30 million that the city’s parking meters and garages collect each year.

The report showed startling swings in the revenue generated by city garages, with some facilities fluctuating by as much as $111,000 from month to month. Department officials also were unable to explain to auditors why the Ford Underground Garage — a busy facility beneath East Jefferson Avenue that serves the Coleman A. Young Municipal Center — reported no revenue for several months.

Then-Councilwoman Sheila Cockrel, whose Budget, Finance and Audit Committee was to review the audits, said at the time that the parking department has suffered from a “fundamental breakdown in process and procedure.”

Some of the problems were almost comical. Bettie Buss, a budget analyst who joined the city in the late 1960s and recently retired from the nonpartisan Citizens Research Council of Michigan, said the city would spend millions on new customized computer systems but not provide adequate training for staffers. So city workers would devise their own work-around methods often involving old-fashioned pencils and paper.

“The systems were completely undependable,” Buss said.

Among specific reasons for the sluggish nature of city operations: Contracts with vendors must be approved by multiple city departments and City Council, slowing down even the simplest projects; and union work rules often resulting in over-staffing or other challenges.

Page said her team of workers in the city’s technology office were often stymied by the bureaucracy. “They had great ideas, but the way city government is run, you bump your head,” she said. “You put together processes and procedures that are going to work only to have have the rules be bent” to get around them.

Moore said the city should shed even more functions that it cannot run efficiently.

“I mean we own graveyards and cemeteries and boat docks and an airport,” she said. “Why do we own an airport?”

Kevyn Orr, the city’s emergency manager, agrees. He and his team have been working not just on a financial plan to lessen the city’s debt, but a revamping of city operations. Details are expected in the months to come.